Here’s a slap for all those out there who have jumped on the “end of the up market” train. You know, the guys who can’t talk about anything except why the market is down to stay or why it has another 20% to go…
By the way, these are the same guys who, last August and September, were convinced that this market had to go higher, especially in the technology sector.
If you have followed me for any amount of time, it should come as no surprise that my Grill Quotient (GQ) – my market predictor based on what the little guy is saying and doing – is now pointing to a bottom. Then, once the trade issues with China are settled, the GQ says that this market is primed for a big run-up.
Here’s why…
One of the better traders at my morning breakfast joint, the Grill, has been running amok with charts and numbers he claims are pointing to a bad 2019.
Actually, not just a bad 2019… a terrible year for stocks, the economy, you name it. He knows for certain that the axe is falling and we’re under it.
(But it won’t fall on him, of course.)
Other members of the beachfront breakfast brain trust are in hunker-down mode with fear written all over their faces. A few months ago, they couldn’t talk about anything but their winning stocks. No one has anything to say now.
When the little guy is scared, it’s a buy signal for the pros. Yes, it is that simple – that’s why the GQ was 100% accurate in 2018.
Here are more positive market indicators.
Every stock on my wish list is well below its 200-day moving average and at or near its 52-week low. The dividend-payers I have wanted to buy for two years are finally in a buy range.
When the folks at the Grill and on TV can’t talk about anything but when the indexes will reach new highs and when the topic at every cocktail party is the big winners in the market, you should be building a wish list – not buying.
But now the street is finally covered in blood, and I love it. I’ve been waiting patiently for this market for years. It doesn’t get any better than this.
Now, do I know for certain the market won’t go down from here?
No, and I don’t care.
My focus is always on buying high-quality companies well below previous highs when the 200-day moving average is above current market price and when the dividends reach my acceptable range of 3% to 4%.
My 30-plus years in the markets have taught me that now is not the time to hunker down. It is the time to buy.
But – and I have said this a hundred times in my pieces – Joe Mainstreet is always 180 degrees out of sync with the market. And as far as I can tell, he always will be. He can’t see this opportunity.
I’m sorry for the negative tone. I’ve been trying since early 1991 to get the average guy to think like a shark: to wait out the run-ups, to buy when there’s nothing but bad news and to always expect a sell-off. (Bank on it!)
So far, my efforts have been a complete failure. However, being an eternal optimist, I will once again, in this down period of the market, pound the table about doing the opposite of what your gut is telling you and buying when everyone else is scared.
That’s my GQ-based call for 2019.
Good investing,
Steve
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